Nirav Modi leaves India as multi-billion dollar bank fraud investigation escalates

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Three people have been arrested on suspicion of helping a billionaire jeweler to defraud one of India’s largest banks of millions.

Nirav Modi, a 47-year-old Indian businessman and billionaire jeweler (Forbes), is accused of money laundering by Punjab National Bank (PNB), where employees in Mumbai issued Letters of Undertaking (LoU) to Modi’s companies and their banks (The Hindu).

An LoU is a guarantee that a bank is obliged to repay the loan if the actual borrower fails to pay back the loan. The employees of the bank allegedly didn’t follow the process of securing cash reserve or collateral from Modi, and there was no record of transactions (Business Today) in the bank’s systems.

Modi is being investigated for his role in the $44m case which is allegedly part of a larger operation that involved $1.8b. The scam was started in 2011 and detected by the bank on January 3.

Sunil Mehta, the managing director of PNB told a press conference: “We will come out of the present situation. We are in discussions with stakeholders, including other banks that are party to this development. We will resolve it and honor all bona fide commitments with other banks.” (New York Times)

Nirav Modi, along with his wife, brother and uncle all flew out of the country (NDTV) in the first week of January.

The opposition party, India National Congress, said Prime Minister Narendra Modi and his cabinet allowed Nirav Modi to leave the country, despite knowing about the alleged fraud (The Times of India). The party says Modi was also permitted to share in a photo opportunity with the prime minister at the World Economic Forum in Davos in late January.

Rajdeep Sardesai on Twitter

BJP says PNB scam began in 2011; Cong says @PMOIndia was clearly informed in July 2016; Key qs: when exactly was fraud detected and what did govt do? And if red flag was put out earlier, then how is this Davos Jan 2018 pic explained? #NiravModi

The news sparked protests in New Delhi from the congress party’s youth wing.

In response, the ruling Bharatiya Janata Party said Nirav Modi was not part of the Indian delegation in Davos and he was part of was part of the Confederation of Indian Industry (The Hindu).

Meanwhile, India’s federal agency raided 35 locations in 11 states in relation to the alleged fraud and has released look-out notices (Hindustan Times) for Nirav Modi and his family members.

 

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